SC recommends changes in IBC rules

The Supreme Court (SC) has recommended amendment of rules pertaining to the Insolvency and Bankruptcy Code (IBC) so as to make it easier for the National Company Law Appellate Tribunal (NCLAT) to grant approvals for settlement among the parties. At present, its inherent power to do so is restricted. As a result, such matters have to be decided by the SC, which has to invoke its extraordinary discretionary powers to stamp the seal of approval on settlements among financial creditor, operational creditor or corporate creditor. This exercise burdens the apex court. Therefore, to speed up the process and enable the tribunal to settle the matter before it without technical hitches, the SC suggested changes in Rule 8 of the Insolvency and Bankruptcy Rules and Rule 11 of the NCLT Rules. While Rule 11 confers NCLAT with powers to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of process, Rule 8 curtails that power. The SC wants to widen the discretion of the NCLAT to avoid unnecessary appeals when the parties have already arrived at a compromise. The suggestion to change the rules was made in the judgment, Uttara Foods & Feeds Ltd vs Mona Pharmachem, where the parties had reached a settlement. While approving the settlement, the court asked its registry to send a copy of the judgment immediately to the Ministry of Law and Justice.